Britain launched a scheme on Wednesday to guarantee billions of pounds of loans to small and medium-sized companies as pressure grows on the government to fight a deepening recession.
Business minister Peter Mandelson said he hoped the loan guarantees would help businesses to refinance up to 20 billion pounds ($29.2 billion) of existing loans, put in danger by dwindling bank lending.
"UK companies are the lifeblood of the economy and it is crucial that government acts now to provide real help to support them through the downturn and see them emerge stronger on the other side," Mandelson said in a statement.
The plan is the latest attempt by Prime Minister Gordon Brown, who is lagging in the polls and must fight an election within 18 months, to kickstart an economy ravaged by a global credit crunch, and follows a job initiative on Monday.
The plan includes a 10 billion sterling Working Capital Scheme, securing up to 20 billion pounds of short-term bank lending to companies with a turnover of up to 500 million sterling, and an Enterprise Finance Guarantee Scheme, securing up to 1.3 billion pounds of additional bank loans to firms with a turnover of up to 25 million.
"We know that some companies are struggling to secure the finance they need, not because of any failure in their business but due to the tougher credit conditions," Mandelson said.
"That is why we have designed a package of measures addressing different forms of credit and providing real help for businesses."
The government also pledged to help businesses raise new long-term finance by investing in viable companies which have high levels of existing debt through a new 75 million pound enterprise fund, to which banks would contribute.
After years of uninterrupted growth, the British economy looks certain to have gone into recession at the end of last year for the first time since 1992 and economists predict falling output and hundreds of thousands job being lost in 2009.
The central bank has cut interest rates to a record low of 1.5 percent but banks, many tottering themselves because of risky bets gone bad, remain scared of giving new credit to consumers or companies, squeezing the life out of the economy.
The government injected billion of pounds into banks' failing balance sheets in October but this has failed to spark a sufficient increase in lending.
